Previously, ECI filing was only meant for a select group of companies. In 2018, for instance, only businesses that made more than S$10 million in YA 2017 filed their ECI. Then in 2019, it changed to accommodate companies that made more than S$1 million in YA (year of assessment) 2018.
If you think that still leaves your company out of the equation, then get this - from YA 2020 onwards, the IRAS requires all companies in Singapore to file their ECI. That means you won’t be able to avoid it anymore. And even if you could, you might not really want to because filing your company’s ECI grants you, among other benefits, a 20% Corporate Income Tax (CIT) rebate.
Read along to find out more about what ECI entails, how to file it, how to calculate the figures, as well as the tax payment procedures that follow ECI filing.
What is ECI in Inland Revenue Authority of Singapore
ECI, to begin with, refers to your company’s Estimated Chargeable Income. You can think of it as the initial tax returns that you file for your company right after its financial year-end.
You see, the thing about Singapore’s corporate income tax filing process is, it has two stages. The first one is ECI filing, which is usually based on estimates - followed by Form C / C-S filing, which, in contrast, declares the actual tax figures.
Make no mistake about it, though. ECI filing isn’t done with randomly-guessed income figures. Rather, you should calculate the estimates from your company’s revenue during the year of assessment. Just work out the profits and then subtract all the tax allowable expenses plus the applicable deductions.
And in case you’re wondering, IRAS ECI filing is compulsory even for companies with zero taxable income. And yes - that includes dormant companies that haven’t been doing any business all year long.
Once you submit your company’s ECI to IRAS, it’ll use the figures to conduct an early assessment of your corporate income tax. You’ll then get a tax bill in the form of a Notice of Assessment (NOA), after which you can proceed with tax payment via GIRO or other acceptable electronic modes of payment.
With that done, the IRAS will give you sufficient time to work out your company’s actual chargeable income and then file Form C / C-S towards the end of the year. This is ultimately used to determine the amount of tax that you should subsequently top up, or alternatively, the tax refunds that the IRAS owes your company.
It’s worth noting, though, that if you fail to file your Singapore ECI, the IRAS will still proceed to prepare a Notice of Assessment - but based on their own estimation of your company’s revenue and chargeable income. Then if you subsequently fail to raise an objection, the issued Notice of Assessment is eventually taken to be your company’s final tax bill.
On the other hand, companies that manage to file their ECI as required get the benefit of capitalizing on a Corporate Income Tax (CIT) rebate of 25% on the payable tax amount. This principle applies to the year of assessment (YA) 2020 onwards, but it caps the total tax rebate amount at S$15,000.
Companies Exempted from ECI Filing
While ECI filing was previously reserved for businesses that made millions of dollars in revenue, it’s now compulsory for all Singapore businesses - even dormant companies with zero income.
Not entirely, though. It turns out you can skip the whole process if your company happens to be:
- Dealing in Real Estate Investment Trusts (REITs) that have been given special tax treatment under Section 43(2) of Singapore’s Income Tax Act.
- Dealing in designated unit trusts or approved CPF unit trusts.
- A foreign university.
- A foreign ship charterer or owner, whose Shipping Returns have already been filed by a shipping agent.
- An entity granted a special waiver by the IRAS - such as through an advance ruling.
How to e-File Your ECI
Although you could file your company’s ECI through paper, e-filing is widely recommended since it’s much faster, has the shortest processing times, and gives you the chance to pay your ECI taxes in multiple installments.
That said, the IRAS allows you to e-file your company’s ECI any time within three months of its financial year-end. Here’s the full procedure:
- At first, ensure that you’ve been assigned as the company’s “Approver” for Corporate Tax (Filing and Applications) via CorpPass. You should also have your CorpPass ID and password, plus the company’s tax reference number.
- With that sorted out, proceed to the IRAS tax filing portal on mytax.iras.gov.sg.
- Choose “Business Tax Matters”, and then proceed to log in with CorpPass. This is where you enter the company’s UEN, along with your CorpPass ID and password.
- Once you land on the dashboard, go to “Corporate Tax” on the main menu, and then click on the “File ECI” option.
- Click on “Proceed” to file a new ECI, verify your company’s details, and the system will launch the ECI filing window.
- At that point, you can go ahead and type in all filing details in their respective fields. Examples include; the year of assessment, the company’s revenue, its estimated chargeable income, etc.
- You should then go to the next page to confirm the information entered, before finally hitting the “Submit” button.
- The system will display an acknowledgment receipt (along with an acknowledgment number) upon successful submission. You might want to print a copy of that for the sake of record-keeping.
On the flip side, you could nominate a tax agent to handle the whole ECI filing process on your behalf. But, instead of “Business Tax Matters”, they’ll use the “Client Tax Matters” section of the portal to log in with their CorpPass ID.
How to Calculate ECI
Since ECI figures are based on your company’s yearly income, you should start by compiling the following documents:
- Your previous year’s Tax Computation and Notice of Assessment.
- Your company’s fixed assets addition and disposal records.
- Your company’s Statement of Profit and Loss.
Then using the bookkeeping records as reference guides, here are the steps you should follow to calculate your company’s ECI:
- Step 1: Work out your company’s total net profit before tax. You can quickly establish this by deducting business costs from the company’s total annual revenue.
- Step 2: Not all “business costs” are tax-deductible. Items like private expenses, fines, penalties, amortization costs, and other expenses that are not related to generating business income are considered non-deductible. So, you might want to recheck your expense breakdown and add back the non-tax-deductible expenses.
- Step 3: While you’re at it, consider the corresponding non-taxable income that you’ve made all year long. This includes funds that your company has generated from foreign countries, capital income gained after disposing of assets, PIC cash payout, capital gains, etc. Such items should be deducted from the net profit as non-taxable income.
- Step 4: After deducting your non-taxable income, you should go ahead and review everything to determine any additional deductions that your company qualifies for. This is where you deduct refurbishment expenses, as well as items under double tax deduction for internationalisation scheme.
- Step 5: Calculate your company’s capital allowances based on your capital expenditure, plus the wear and tear on your company’s income-generating fixed assets. You should then deduct them, along with any unutilized allowances and losses from past YAs.
What you obtain in the end is your company’s Estimated Chargeable Income (ECI). And since it’s all based on estimates, you don’t have to sweat it out while trying to establish the exact figures. You can reserve that for Form C / C-S filing.
That said, you also should keep in mind that the IRAS expects you to additionally declare your company’s revenue in the ECI form.
Now, for the sake of clarity, revenue is essentially your company’s principal income source - excluding gains made from fixed asset disposal. If you’re running an investment holding company, for instance, you should calculate the revenue from its investment income in the YA.
You can obtain such figures from the company’s audited financial statements. And if they’re not available, you could refer to the corresponding management accounts.
Getting Your Tax Notice and Paying Estimated Tax
When you calculate your company’s ECI and file everything accordingly, the IRAS will evaluate your chargeable income and then issue a corresponding Notice of Assessment. Companies that fail to submit their ECI, on the other hand, are reviewed based on revenue assumptions - which could potentially be higher than the actual revenue.
Whichever the case, you’ll find your company’s NOA in the tax portal. Just go to mytax.iras.gov.sg and log into your account using your CorpPass credentials.
Please note, however, that if your ECI amount turned out to be zero, you won’t be receiving a Notice of Assessment from the IRAS. NOA is only intended for companies with chargeable income - as it states the payable corporate income tax.
This tax amount should be paid in full within one month from the moment you receive the Notice of Assessment - unless, of course, you choose to pay your taxes in installments via GIRO. Alternatively, you could also defer your tax payment for up to three months, under the principles stated in the 2020 Resilience Budget.
Now, when it comes to settling your corporate income taxes in Singapore, you should find the payment options in the Notice of Assessment. You could either proceed with GIRO or other electronic modes of payment - such as NETS, phone banking, and internet banking.
All things considered, however, we’d advise you to use GIRO since it’s quite flexible. The only thing is, GIRO is only open to companies that sign up for the program. So, you might want to get your company registered beforehand - at least three weeks before filing the ECI.
Paying Your Taxes in Installments through GIRO
While other tax payment modes compel companies to settle their NOA tax bills within one month, GIRO is flexible enough to spread out the payments across several months. Yes, that’s right - Singapore companies that sign up for GIRO in time for ECI filing get the benefit of paying their taxes in installments.
You just need to apply for GIRO early enough to have it approved before the tax payment due date. Otherwise, you’ll be forced to settle the tax bill in one lump sum payment.
That said, the Singapore 2020 Budget gives GIRO-approved companies an additional two months to make their tax payment. And the best thing is, the tax balance doesn’t attract any form of interest in the meantime. So, you should be able to clear your taxes without incurring additional charges.
You can confirm these details from the installment plans that you’ll find at myTax Portal.
How to Get Started
While we’ve made it all sound simple, the truth of the matter is - compiling all your company’s bookkeeping records, calculating its Estimated Chargeable Income, and then filing everything can be a pretty cumbersome process. The whole thing might, admittedly, take you weeks or months of working out the figures.
Fortunately for you, though, we understand that you cannot afford to waste your precious time sweating such small stuff. You’d be much better off leaving all your tax filing to us - the experts - while you direct all your attention to running the business. You can get started by taking advantage of our free consultation.